T

he National Economic Committee (KEN) says quick changes in government policy triggering high costs and labor issues are threatening the manufacturing industry in Batam, Riau Islands.

'€œI met a lot of owners of holding companies in the manufacturing industry that supply components to major companies. To them, Indonesia is important, but we have the issue of uncertainty,'€ said KEN member Umar Juoro.

'€œBatam'€™s weakness is more on domestic issues. Batam is far superior in several matters compared to Penang in Malaysia or Vietnam, but when it comes to regulations and labor issues, Batam can'€™t compete.'€

He was speaking on the sidelines of a press conference with the Bank Indonesia Supervisory Agency (BSBI), Bank Indonesia (BI) and the House of Representatives'€™ Commission XI overseeing finance, recently.

According to Umar, to improve the situation, the government should take immediate measures and apply a new and feasible model. Regarding manpower, intense negotiations should be carried out between trade unions and employers when considering wage increases, by putting inflation and productivity under consideration.

'€œThe central government and regional administrations apparently are not on equal terms regarding the matter. We saw a good concept by [former president] BJ Habibie in developing Batam, but that could not be applied today as Batam has changed significantly,'€ said Umar, who was once an expert staffer during Habibie'€™s
leadership.

A number of foreign manufacturing industries have closed due to various reasons. Last year, some companies halted their operations in Batam, such as PT Panasonic and PT Nutune, while this year PT Shin-Etsu and PT Sun Creation Indonesia also stopped their operations on the island.

For the manufacturing industry in Batam, Umar continued, the current situation was not considered conducive, with workers demanding higher wages and the rallies scaring off investors.

'€œIf this is left unchecked, the manufacturing industry will become stagnant,'€ Umar said.

'€œInvestors will choose better places that provide more certainty, while the only survivors are high-end industries, such as oil and gas and shipping. They will lay off workers as long as they can survive ever changing government regulations,'€ he added.

Umar said businesspeople had hoped for an improvement.

'€œI don'€™t predict the manufacturing sector will die in Batam if we are able to overcome regulatory and labor issues,'€ said Umar.

House Commission XI deputy chairman Azhar Azis said the government should take immediate measures to overcome various pressing issues in Batam.